Mortgage Relief That Comes With a $4,000 Bill

Borrowers with privately held mortgages don’t have the same options as those with government-backed loans. Some are being told they can skip payments, if they make them up all at once.

Edith Duran of DeLeon Springs, Fla., said her mortgage servicer had told her that she could pause her payments for three months but that a lump sum would then be due.Credit...Eve Edelheit for The New York Times

As the owner of a small marketing agency in central Florida, Edith Duran quickly found herself in a difficult spot as the coronavirus pandemic crippled the local businesses she counts as clients. She couldn’t draw her full salary in February, and by March, she was seeking relief on her mortgage.

She was allowed to pause her payments for three months starting in early April, but the company that handles her mortgage made a seemingly impossible request: Pay back the $4,450 in skipped payments on July 1.

“That is a lot of money to come up with all at once when we are struggling to get things aligned and get our lives back in order,” said Ms. Duran, who owes about $163,000 on her four-bedroom ranch in DeLeon Springs, Fla.

With unemployment soaring, millions of borrowers have flooded mortgage firms with requests to hit the pause button on their loans. Federal officials have made it possible for borrowers with government-backed mortgages to suspend their payments for up to a year without immediately paying it back. But about 30 percent of homeowners with mortgages are like Ms. Duran. Their loans are owned by banks or private investors and are not governed by the same rules.

“The main problem right now is mass confusion,” said Diane Thompson, a lawyer at the National Consumer Law Center. “Borrowers are getting forbearances, but maybe for not as long as they would like, and it isn’t really clear what will happen on the back end when they need to start repaying their mortgages.”

More than 4.6 million borrowers, holding about 9 percent of all mortgages, were in forbearance as of Tuesday, up from just 150,000 in early March, according to Black Knight, a real estate data and mortgage software firm. Housing counselors who are accustomed to assisting low- and moderate-income borrowers are also now helping professionals who never expected to be in this position. Some states have also put foreclosure moratoriums and other protections in place.

Many borrowers have at least been able to get a forbearance for three months, according to housing counselors across the country. But what happens after that — and the type of longer-term relief offered to borrowers — will be determined by what kind of loan they have and who owns it.

Borrowers “are safe right now, but this is just the Band-Aid effect,” said Katherine Peoples, founder and executive director of HPP Cares, a nonprofit consumer credit and housing counseling agency. “This is the calm before the storm.”

Nearly 70 percent of homeowners with mortgages have loans somehow supported by the federal government. Fannie Mae and Freddie Mac, two government-sponsored entities, buy many loans from lenders and package them into investments that are akin to government bonds. Other borrowers who often put less money down have their loans insured by the Federal Housing Administration. Because of the government’s involvement in those loans, regulators have laid out options available to borrowers who must skip payments, and in almost all cases they can push back what they owe until the home is sold or refinanced or when the loan term is up.

The situation is often murkier for borrowers, like Carla Knight of Queens, whose loans are held by private investors.

Until recently, Ms. Knight, 50, worked as a paraprofessional caring for mentally challenged children while they rode on a school bus that now sits idle. Her paycheck was reduced before she was laid off completely on May 4.

After her pay cut, Ms. Knight called her mortgage servicer, Mr. Cooper, which said it would provide a three-month forbearance on her $198,000 loan with a lump-sum payment due when she restarted payments.

She called again after she was laid off, and the servicer extended her forbearance to six months — but she’d still owe a lump-sum payment. Come September, Ms. Knight said, she would owe roughly $13,500. If she isn’t allowed to push that back, her only alternative is to pursue a loan modification, which could, for example, allow her to extend the length of her mortgage. But that’s a more complicated process and often requires an application.

The uncertainty is unsettling. Ms. Knight, who lives with her 13-year-old twins and granddaughter in a four-bedroom home, said she had asked the company if the payments could be tacked on to the end of her mortgage. “But they keep telling me they have modifications,” she said.

Mr. Cooper declined to comment on her specific situation. A spokesman for the company said that its customers were offered an initial 90-day forbearance, but that it would grant relief for up to a year upon request. The company also said it was offering customers options to pay back the money over time, similar to alternatives offered to borrowers with federally backed loans. Ultimately, however, loan investors determine the options available to customers after the forbearance period — and in which order those options are presented to customers.

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Ultimately, investors in private loans determine the options available to those borrowers after a forbearance period.Credit...Stefano Ukmar for The New York Times

Borrowers with federally backed mortgages have more consistent terms. Those who can afford to restart paying should be presented with different ways to make up the skipped payments. They’ll be able to do it over time — say, six or nine months — while making their regular payments, or settle up when the loan term is up.

Even so, there has been confusion: A housing regulator had to release a statement in late April to make it clear that no lump-sum payment was required at the end of a borrower’s forbearance period. Some housing advocates say confusion has lingered, with homeowners whose mortgages are backed by the government still being told that they’d have to make lump-sum payments when they resumed their loans.

Frequently Asked Questions and Advice

Updated June 5, 2020

How many people have lost their jobs due to coronavirus in the U.S.?

The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.

Will protests set off a second viral wave of coronavirus?

Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.

How do we start exercising again without hurting ourselves after months of lockdown?

Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.

My state is reopening. Is it safe to go out?

States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.

What’s the risk of catching coronavirus from a surface?

Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

How can I protect myself while flying?

If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

Should I wear a mask?

The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

What should I do if I feel sick?

If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.

Wells Fargo is offering Allen Butler of Wheeling, Ill., who has a private loan, an option similar to those given to government-backed borrowers: He can push his payments to the back end of his mortgage.

Until recently, Mr. Butler worked as an M.R.I. sales rep with the same company for eight years. Though the process to recertify his unemployment benefits has been frustrating, he had little trouble receiving a forbearance.

“They were prepared for it,” said Mr. Butler, who lives in a four-bedroom townhouse with his wife and two sons, who are attending college. “We got a letter from Wells Fargo stating that we didn’t have to pay for three months or until July,” he said, “without any penalties or reporting us to the credit bureau.”

Wells Fargo said many of the loans it serviced were held in its own portfolio, which means it is not beholden to the terms of an agreement with private investors. The bank said it could suspend payments for up to a year and then, with its own loans, the borrower could tack the missing monthly payments to the end of the mortgage, without having to do anything else.

Whether a mortgage is backed by the government or another entity, the situation becomes more complicated for homeowners who still can’t afford their payments after the forbearance period. A more formal evaluation is necessary to modify their loan, which might, for example, extend the overall term to help them lower their payments. But if they have a private loan, a lot will depend on the terms with the private investor.

Ms. Duran, 44, is still waiting for the unemployment benefits she applied for the second week of April, but she is keeping a positive attitude. She’s also waiting to see if she’ll receive any assistance through federal relief programs for small-business owners.

In the meantime, she’s working with a financial counselor at GreenPath Financial Wellness, a nonprofit financial counselor in Farmington Hills, Mich., that has helped her trim her budget and inspired her to come up with new ways to increase her business revenue, like creating online marketing courses. The organization has also helped her consider strategies for dealing with her mortgage servicer, Select Portfolio Servicing.

The company did not respond to messages seeking comment. But according to a letter Ms. Duran shared with The New York Times, the servicer said it would “clearly communicate” with her about repayment options. One possibility, it said, was a deferral that would be due upon her loan’s maturity or when she paid off the mortgage.

That’s the kind of solution she’s hoping for, but when Ms. Duran called the servicer this week, she said, it told her that it would discuss further options only 30 days before the lump sum was due.

“This is my house,” she said. “It is really important that I don’t fall behind.”

Resources for Homeowners

If you are having trouble paying your mortgage or have already paused your monthly payments through a forbearance, here are some resources that may help:

The Department of Housing and Urban Development offers a list of housing counselors on its website (or call 800-569-4287), and so does the Consumer Financial Protection Bureau. Counselors who are certified by HUD often offer their services free of charge because they receive funding from the government.

The National Housing Resource Center offers a directory of mortgage servicers. Servicers are generally supposed to contact you 30 days before your forbearance period ends to discuss your situation and your options. But if you don’t hear from them, or are concerned about what comes next, be proactive and call them.

If you’re having a problem with your mortgage servicer, you can file a complaint with the Consumer Financial Protection Bureau. It will forward the complaint to the company and work to get a response, generally within 15 days.